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On Our Radar

Why Energy Transfer Partners, Canadian Solar, and Cubic Slumped Today

Monday was a great day for many investors, as major stock market benchmarks hit new record-high levels. Gains of between 0.5% and 1% came on the heels of solid performance in the energy market and continuing enthusiasm about the future direction of the U.S. economy. Yet even with those big gains for the stock market broadly, some stocks didn't participate in the rally, and Energy Transfer Partners (NYSE: ETP), Canadian Solar (NASDAQ: CSIQ), and Cubic (NYSE: CUB) all suffered big declines. Below, we'll look more closely at these stocks to tell you why they did so poorly.

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Image source: Energy Transfer Partners.

ETP takes a hit despite merger deal

Energy Transfer Partners fell 7% even after receiving a buyout bid from industry peer Sunoco Logistics (NYSE: SXL). The two companies announced this morning that Sunoco would seek to acquire Energy Transfer Partners in an all-equity deal that will give Energy Transfer investors 1.5 units of Sunoco for every Energy Transfer unit they own. Consolidation is usually a positive event for companies, especially those that are getting bought out. However, some investors worry that because Sunoco's distribution yield is less than Energy Transfer's, the merger will result in Energy Transfer unitholders receiving less distribution income following the deal's consummation. The trade-off is that the combined company's balance sheet should be healthier, but investors seemed to put more value on the lost income in sending shares of both energy master limited partnerships down.

Canadian Solar's prospects look cloudy

Canadian Solar dropped 9% in the wake of its third-quarter financial report. The solar company said that it shipped 1,185 megawatts of solar modules during the quarter, falling short of its 1,200 to 1,300 megawatt estimate. Revenue also fell short of previous guidance, and despite gross margin gains, net income fell by more than half compared to the second quarter of 2016. Even though Canadian Solar had strong success in Europe, where revenue more than doubled from year-ago levels, performance in its much larger Americas and Asia regions was much weaker. CEO Shawn Qu blamed "the dislocation of the global solar market during the quarter and the quarter-end logistic disruption caused by the bankruptcy of Hanjin Shipping" for much of the poor results. Going forward, Canadian Solar still thinks that it can rebound by managing its inventory and manufacturing processes as efficiently as possible to overcome macroeconomic challenges in the solar market.

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Cubic looks square

Finally, Cubic fell 10%. The maker of transportation and defense systems and services reported a 5% drop in fiscal fourth-quarter revenue compared to the year-ago period, with particular weakness in the global defense systems and services segments. The sales drop helped send adjusted pre-tax operating earnings down by more than a third, and full-year results were equally troubling. However, CEO Bradley Feldmann is optimistic that much of the disruption is due to order delays that will simply come in during the 2017 fiscal year, and if that's the case, then today's declines could reverse themselves as soon as signs of healthier growth start to emerge. However, guidance for fiscal 2017 was weaker than many had expected, especially on the bottom line, and that could hold Cubic stock back.

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